State Bank of India
NSE:SBIN
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State Bank of India
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Good evening, ladies and gentlemen. I'm Pawan Kedia, GM, PPR. On behalf of State Bank of India, it gives me great pleasure to welcome all of you, the analysts and our colleagues present in this call. A warm welcome to all our analysts, investors and colleagues who are joining us through the live webcast on the occasion of the declaration of the Q1 FY '20 results of the bank. We have with us on the stage our Chairman, Shri Rajnish Kumar, at the center. To his left, our Managing Director, Global Banking and Subsidiaries, Shri Dinesh Khara. Our Managing Director, Commercial Client Group and IT, Shri Arijit Basu, is seated next. And our Managing Director, Stressed Assets, Risk and Compliance, Smt. Anshula Kant, is seated next to Shri Dinesh Kumar Khara. Our Deputy Managing Director and CFO, Shri Prashant Kumar, is seated next to Shri Arijit Basu. Our Deputy Managing Directors heading various verticals and Managing Directors of our subsidiaries are seated in this hall, first row. We are also joined by Chief General Managers of various verticals and business groups. Without further ado, we request our Chairman, sir, to highlight the bank's Q1 FY '20 performance and strategic initiative undertaken. Thereafter, we will straight go to question-and-answer sessions. First, I hand over -- before I hand over to the Chairman, sir, I would like to read out the safe harbor provision. Good evening. Certain statements in these slides are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. The figure, ratios and parameters relating to March '17 are for the merged entity unless otherwise stated. Thank you. Now I request Chairman, sir, to make his opening remarks. Chairman, sir, please?
Yes. Good evening to all of you. I'm sure you had already analyzed the presentation which was put up on our website. But still to give a few highlights. One is that the pre-provision core operating profit of the bank, it has shown a decent growth. The number says 10.63%. But if we do an apple-to-apple comparison, it is actually 32% because last year, we had INR 1,900 crore coming from 2 accounts in the operating profit. If we take that away, then a 32% growth, which is a decent growth. Net profit, of course, INR 2,312 crore. The credit growth is -- domestic credit growth Y-o-Y is 11.89%. Deposits is, of course, 7.32%, but CASA, we have been able to maintain a steady ratio at around 45%. And first time we are seeing that current account -- the average current account balances are showing the highest growth at 8%. The liquidity of the bank is comfortable. The capital adequacy, no issue. NIM is 3.01%. And gross and net NPAs, they have not -- they have been contained. They are at the same level. In percentage terms, the improvement is not as visible because of the denominator effect. And YTD growth this year is down by almost INR 30,000 crore. So in percentage terms, obviously, that's why the gross and net NPA, it seems that there is no improvement in percentage. Provision coverage ratio has further gone up, in line with bank's policy for timely recognition and then provide adequately. In fact, this does not include provision of almost INR 2,300 crore, which we have made on the 2 accounts, which are in terms of amount quite significant. And still, they are under the standard, but as for RBI, 7 June framework would fall in the category of the accounts in financial difficulty, and proactively, we have started building up the provision for these 2 accounts. The credit cost at 2.03%, but this is the first quarter. Going forward, it will definitely come down, and this is an annualized number. And the credit cost, more or less, whatever we have estimated at the time of the last earning call. We may be able to maintain that estimate. One very heartening feature is that now the alternate general transactions, it has exceeded 90%. For the size of the State Bank of India, that is a very remarkable achievement. And 56% is the digital channel, given we are seeing decline in ATM transactions in terms of percentage terms, which is now at 29%. The subsidiaries are performing well. And overheads are under control. The only thing which is where we had to make higher provision are on account of pension liability because one, the yield has dropped by almost 100 basis point as compared to the last year, plus there is a provisioning requirement on account of Vijaya division. So I can run through the presentation, if you want. We can quickly go through it. Or we can straight away go to the question and answers, whatever you wish. Please let me know. Want me to run through the presentation? Q&A. So we go for Q&A. And then we will come to those slides depending upon whatever is the question.
[indiscernible]
Of?
[indiscernible]
Slippages of INR 16,000 crore, right?
Agri.
Agri slippages? Agri slippages this time in one state, INR 2,000 crore. And other than that, otherwise, I would say, normal across all other geographies.
Can we give her the mic?
Mic.
So apart from agri, the same customers would have other loans as well with you?
That does impact.
So what is the spillover -- what would be the spillover?
So what happens when one account, even if it is in agriculture, gets classified as NPA. And if there are accounts in P segment, they will also get classified as NPA. And this is one of the reasons for some growth in the P segment NPAs.
Got it. But sir, any amount you can quantify for the spillover to the P segment of the...?
It's not that significant because agriculture is the main activity. And then for P segment, the loan is very limited, so not a very significant amount. But yes, it is contributing to the improvement in P segment NPAs.
And when would these loans that slipped this quarter be recovered, for agri especially?
Agri, it is very difficult when the loan gets -- it slips because already the dispensation, I think, in agriculture is favorable in terms of asset classification. And once it goes into NPA, our people make effort to renew. One of the conditions of the renewal is that the credit should be more than what has been debited and the account has to be 0. So that's why like in an environment where we have all the agriculture debt reverse and this thing. So once the account slips in NPA, then recovery becomes a bit difficult. We tackle it through, we have last year, also about INR 1,300 crore, INR 1,400 crore we were able to recover through Rin Samadhan, which was our scheme for these small value loans. Not exclusively for agri but for all segments. But it all depends upon like the renewal of it.
Sir, in terms of the June 7 circular, so now how many accounts have you already started addressing through the June 7 circular? And how many of Sashakt and Samadhan are now being resolved through the new circular?
So Sashakt, I think Sashakt is no more relevant after 7 June circular, where the IC has become mandatory as per RBI circular. And 46 accounts, we had identified there. SBI is there. And the system -- banking systems exposure is more than INR 2,000 crore. So 6 accounts, we decided to refer to NCLT or they were already in NCLT. Two accounts, in any case, they got rectified. So out of 38 accounts, 18 are NP, so they don't impact and our provision is 52%. And rest 20 accounts are what you can call as standard, but they may be non-SMA industry. In fact, SMA is just INR 2,600 crore in this category out of 20 accounts. And 2 accounts constitute almost 70% of this.
Of SMA?
For these 20 accounts, which are not NP and where we have signed IC.
Two accounts, 70%?
70%, INR 14,000 crore. It's true.
Got it. And sir on TV, you mentioned that in the SMA category, there's one big account of 20 -- INR 2,000 crore and...
We have adjust for that. This is like 31st July, it has been adjusted.
So it's no longer part of that.
In the -- it is not -- no longer part of this. But in our -- the INR 16,000 crore slippage, there is another account, which is otherwise being serviced in time. There is no issue around the servicing. But out of 18, 19 lenders, only one bank could not complete the documentation in time. So that's why in that bank, the account was classified as NP. And then all banks as per now current RBI dispensation, all banks classified this as NP. We were only 90% provisioned at that account, so it has not any impact -- significant impact from P&L perspective. But in the slippage ratio, which you are seeing as INR 16,000 crore, INR 2,000 crore is coming from one account.
Got it, sir. Sir, and any update on [ the one ] resolution?
Again, that is INR 14,000 crore.
Sorry, sir?
This is part of that INR 14,000 crore.
Right. But what about the...
The resolution plan, it is a work in progress and company has yet to give the final resolution plan. But they are really actively working on it. As well, Capital Markets is working on it. And I think in the next couple of days, we should be able to finalize. And as soon as the resolution plan is received from the company, it will be circulated to all the lenders, a meeting will be convened and it will be decided what should be the further course of action.
Sir, Ashok Ajmera from Ajcon Global. No, it's good to see, sir, the bank again coming back with over INR 2,000 crore of profit. I mean, this is the first figure which everybody would like to see. Having said that, the slippages are the biggest concern, going from INR 8,000 crore to INR 16,000 crore. So though I heard some answers on the INR 2,000 crore, interesting, but what is the overall -- what is the reason for going it up so high? And which are these some 2, 3 -- those accounts?
No. One is the -- one account, as I said, otherwise is standard, performing and it is in [ Bihar ] state only. It is a very old district. You can make out what account I am talking about. And -- but one bank because of delays at their end, so the entire system is suffering. And the account has to be classified as D3. P&L, not much impact because 90% provision banks were holding. And INR 2,000 crore is coming from that. So if you exclude that, so we are almost identical, INR 3,300 crore, quarter 1 '19 and quarter 1. SMA last year, I had benefit of INR 1,500 crore by way of restructuring and forbearance given by RBI. Agri, INR 2,000 crore coming from single district. And P segment, the book has also grown by almost 1 lakh crore, so I would not be worried as much about it. So if you ask me more than the normal, is the INR 6,000 crore.
Yes. That would have made a lot of difference.
Yes, a difference. So bad headline for the bank.
But sir, in spite of the much lower provisioning for the -- [ not tax ], still the profit is not that much correspondingly though it's good to be -- to see the profit of INR 2,000 crore plus. And the reasons, according to me, are that other income has gone down tremendously on all the 3, 4 heads, if you see, major is that lower recovery in the return of account in this quarter. I think if you can run that slide. That is also one of the reasons for that. So that is almost about 5, 6 -- about INR 7,000 crore, INR 8,000 crore, is it, from INR 8,500 crore to INR 5,000 crore, from INR 2,800 crore to INR 1,800 crore miscellaneous income, in which the recovery is from INR 2,400 crore to INR 1,300 crore. So this shows that a little -- I mean, a little more efforts could have been put on the recovery front as well as...
A little more effort by whom? By the banks or the judicial process?
Of course, there must be some other accounts also in this.
See, last year, the first quarter had one...
Two NCLT accounts.
Bad account for INR 1,360 crores, which came there, in return of accounts, yes, OCA.
So OCA, what is the recovery in OCA? This INR 1,358 crore is the total?
Total, but last year, because of all those Bhushan Steel, Electrosteel and all that, so some impact there. But this recovery, it may so happen that in 1 quarter, we may have a very high recovery. So already out of 3 accounts, 1 account we have already gotten out of finally. So just it came through this path.
So this quarter, current quarter, will be much better?
It should. Yes, if something else does not happen. And then the Essar Steel, Supreme Court, this month we are expecting order. Bhushan Power and Steel, 3 months. Hearing was done 3 months back, 3.5 months. So hopefully, one day, we could see the light of the day.
Sir, the fee income going down by INR 3,500 crore in the first quarter. I mean if you just compare with the Q4 of last year, does it reflect the total slowdown in the economy? Some of the new loans would tend to be -- I think the other day, Mr. Basu was there in one of the conference, and I had the same question that -- yes.
But Q1 is never comparable to Q4 because if you look at it, the Q4, every year, whatever is our normal profit, INR 4,000 crore, INR 5,000 crore we get in the last quarter. So I won't read too much in this comparison between quarter 4 and quarter 1. But there are subsequent slides which show advice. So this will be more relevant for this purpose. And if you look at it, recovery and return of account is many, right?
Listen, this is only fee income.
No. No, this is only fee, which shows that the remittance fees and other thing also has come down, which shows that lesser economic activities. Like, even the remittance, collections, INR 1,400 crore down.
Yes. No. Don't compare with quarter 4. Compare it with quarter 1 in financial year '19. If I was getting through all the -- I would love to do that. But whatever is quarter 4 throughout the year, if I get it, nothing like it. But quarter 1 and quarter 1, if we do the comparison...
Some of the fees, actually, we collect in quarter 4 for the whole year. That's why it gets...
For the whole year. That's why it has this thing. But if you look at commission on LC/BG has gone up. Cross-selling is flat. Account maintenance charges, you know that there is a limitation. And remittance and collection, it has gone up by almost INR 500 crore. Miscellaneous fee income is down, but there is, again, a breakup there. And so overall, quarter-on-quarter basis, nothing great. Let me put it this way, but there's still -- there's a growth.
And my last, this thing, sir , only in this particular span of my questioning. Our observation is that the advances have gone down, domestic advances, [ by about ] you see, in this quarter by almost about, I think, INR 60,000 crore.
INR 80,000 crore.
No. 19,28 (sic) [INR 19,28,439 crore] 19,90 (sic) [INR 19,90,746 crore]
INR 55,000 crore, between March and June.
Yes, I just compared it because that is -- are the figures which should be compared with the Q1 of last year. So what is the reason there? And what is the way forward? And what...
For quarter 1, if you look at it, the quarter 1 YTD growth is always negative. Because always, as much as we may try and wish, we never try to push the growth in last quarter. But corporates, they're in the habit of growing in the last quarter. Every year, we sign a letter, please don't draw in the last quarter. But that happens.
Overall, the guidance of 12%...
12%, that remains.
Remains. Okay.
Our average advance level, just to give you -- so average advance level in the quarter is actually up by INR 26,563 crores over the previous fourth quarter.
As compared to the fourth quarter. Fourth quarter.
So this quarter, the average balance in our accounts, but when -- which is why our interest income is high.
Income is also higher.
Sir, just a few clarification on this PSU account which got slipped. It has been recovered also, right?
Yes, the recovery was always there.
Yes. And you said you are maintaining a 90% PCR there?
Up to 100 there -- no, it is 100%.
But this is a PSU account?
Yes.
But why would you maintain such a high level of PCR? Is it a dated account or...?
It was dated account. Obviously, it is not D3 because it became a failed restructuring. As for restructuring, the plan is working perfectly, right? But because 12 February circular, what did you see? That you have to complete all the formalities within this time frame. Now if one bank fails to do that for whatever their internal reason, then all the banks suffer. So all the banks are suffering.
Sure. And secondly, on this ICA where we have signed or likely to sign INR 190-odd crores, INR 190 million exposure.
INR 19,000 crore.
Yes, INR 19,000 crore, the number. Except D1, how would be the sort of sectoral breakup there?
They all are relatively little from bank's point of view. One is a renewable energy account, another INR 4,000 crore. So 18 accounts in INR 5,000 crore. So they are across the industry.
And sir, under what circumstances?
Mostly power.
And in this ICA, when you sign an ICA, if there is a little bit of restructuring, so under June 7, they will slip first and then there will be recovery?
They will be first?
They will be slipping first. And then they would...
No, not necessarily. If there is a change in management or promoted, then it does not need to slip.
That is the only condition, right?
Yes.
That's right. That's right.
And then second, if you can share the MTM that we will have on the corporate bond this quarter because the number there...
I think it was about -- how much? INR 1,200 crore?
INR 1,200 crore.
Depending on the bond. Corporate bonds.
Ah, corporate bonds. 1,200? 2,000?
[indiscernible] 1,200.
INR 1,200 crores. But because there was no carryover loss, so you can't take the entire benefit.
Okay. And second, sir, you mentioned this credit cost estimate is still intact. If you can share what is your sense of the credit cost.
My sense is that, as of now, it appears, 2.03%. But my sense is that when we close the year, it should come down to around 1.4%.
And for the full year, how would it...?
Full year.
Full year. That's what it is.
For full year, 1.4% roughly. And just last question, sir. We are hearing a lot of downgrades every single day. So what is your sense on the health of the economy?
Health of the economy. We are discussing so much. So I think we are seeing slowdown. And what can revive the sector is, one is, after the budget, I think now the government should start spending money. Just still more than the private sector, it will be the government spending which will help in the revival. And construction should get a sufficiently good boost because affordable housing, government has made quite a few initiatives in the budget there. Then growth sector, there is a huge demand for funds and construction is going at a good pace. So these 2 itself should help in reviving the demand. But we are seeing a lot of slowdown. We have seen the numbers. The project pipeline because the State Bank is the largest as far as project finance goes, we have a good number of proposals in the oil and gas sector because of the city gas projects and the refinery, which is coming up or a few LNG terminals are coming up. Then fairly good pipeline for road projects and some renewable energy projects. So these 3 sectors are maximum. Their projects are coming up. Other than that, it is nothing significant as of now.
First, congratulations to Mdme. Anshula Kant for the elevation. Second, thing, sir, SBI being proxy to India, whatever estimates you're hearing based on the previous quarter, and seeing month of July and we equity and market-related people think that it's not sounding as good as what you are indicating.
The numbers are before there, though.
No, no. SBI numbers I'm not talking about. SBI is taken as a market proxy for India because of the market share what you have. Seeing the equity markets where they behave with the attitude from the government, do you see as what you are seeing? Or you see a situation actually deteriorating at your level?
No. Very difficult to say at this stage that what will happen. But the fact is that most of the sector is still. They are having one issuer. And whatever sector you pick up, say, you take steel, for example. The iron ore prices have gone up in the country, but the finished product price has not gone up. So iron ore prices are higher as compared to the international steel.NBFC slowdown or flow of funds, that is also impacting, and we have to find a way to improve the flow of credit through NBFC and from NBFC to the consumer finance or the construction sector. And so as of now, I can't think of any bright spot. But as I said, and I was responding to the previous question, again, even last year, that was the case. Again, this year, the public sector undertakings and the government funding of the projects, so that spending will have to go up to give a good push. And we need to address the issue of flow of credit to NBFCs.
Are we sensing or are we likely to fund more NBFCs than where we stand today or...?
So we are watching the situation. And in today's circumstances, even making a guess is very hazardous. But as of now, the immediate problem is, of course, the account, which is in everybody's knowledge. And I believe that if it is successfully resolved, then it may give a boost to the sector.
So if we don't have indirect funding, then our direct marketing efforts should reflect in the current quarter where auto loans, housing loans, because our market share should be increasing. Are we sensing that at least?
But market share like in housing loan, we have 35%, amongst, HFCs excluded. But if HFC, you take into account, then about 21%. Auto loan, our market share is 34%. So increasing the market share even beyond this, where we are growing our housing loan portfolio at around 18.5%, there's a limitation even in growing that. But definitely, there is an opportunity for all the banks and most of all, for State Bank of India with such a large distribution network. So we are capable of handling the volumes. We have the processes in place. Liquidity is not an issue. And if you want a little bit more input, Parveen, you can give that about the retail, how are we seizing the opportunity.
Yes. So the retail overall has been doing well. I think the 18% non-housing is, I think is [indiscernible] necessarily. We're not trying to push too much also. Personal unsecured loans, okay. So that is one segment which has been growing very fast. But again, the difference between our portfolio and the other banks is that most of our accounts are the salary accounts, okay, and where people have the salary coming into with us. So some of them are actually tied up as a part of corporate salary package. Or even otherwise also, the ones where we see the regular flows happening into the accounts, actually. So we don't really see a slowdown happening there, actually. So I think as long as we continue to maintain our underwriting standards and continue to -- there is a huge potential that still exists, actually. I don't think we are looking to be very aggressive here. But given the very cautious approach we have been having so far, we will continue to grow at the rate which we are growing, around 18% to 20% for the overall personal segment loans, actually.
Your view on the credit policy and India G-sec?
The credit policy, and where we see that, I think at least 25 basis point cut. I think everyone is saying [indiscernible] but I'm also going...
So you don't see 50 happening?
As well?
You don't see 50 happening?
50 is unlikely.
50 is unlikely. Okay. And India G-sec? India general G-sec?
[indiscernible] was saying 6%, but it is unlikely because [indiscernible]. At one stage, our Chief Economist was very bullish and said that it will go down to 6%. But that doesn't seem to be happening as of now.
So today, again, like he's saying, that it will be below 6%.
6%, but we have to take into account like what is happening on the external front. If there is an outflow, which is happening as of now, it may put pressure on our results.
Sir, I have a follow-up question again on D1, that there are bondholders, there are banks, there are NBFCs. So this is very complicated, and therefore, will it take very long to resolve?
If there's a bill, it can be resolved very quickly. And -- but you're right, that when there are such a large number of decision-makers, so how fast they will decide, we have to see. But 6 December, in any case, is the alternative. It cannot be later than that.
Which one, sir? Sorry?
6 December.
6 December for the resolution to be implemented?
Yes.
That's right.
Okay. But sir, the issue is that the media goes on saying that the company is coming up with the resolution.
It has to come up with the resolution.
So SBI Caps is helping the company?
And the lenders.
Okay. So who's going to frame the resolution plan now? Who's framing it?
How does it matter whether they will convene with [indiscernible] or SBI Caps [indiscernible]?
No, technically, the company has to submit.
Technically, the company has to submit the resolution plan and lenders have to evaluate, assisted by SBI Caps.
The question is on SME. So the overall slippages in SME are almost INR 4,000-odd crores this quarter. And when we look at last full year, it was roundabout INR 9,000-odd crores. So the run rate in the SME is quite high and that the growth out there is hardly like 2-odd percent in the portfolio. So how are we sensing the overall risk in the SME? And does that pose the overall risk to the slippage run rate as well because it's more than 7-odd percent in this quarter compared to like 4-odd percent last year?
Yes. I think this quarter, the slippages were slightly higher. One reason, of course, is you know that RBI had this dispensation for the SMEs, which has gradually got withdrawn actually. So last year, first quarter, we had almost INR 1,100 crore, INR 1,200 crore for dispensation, which we have got used, actually. So right now, practically, there is nothing, only about INR 76 crores of dispensation that still remains, actually. There have been some trading accounts, small value trading accounts, where we saw some slippages happening. We have actually had analyses of that. This seems to be more of a one-off. But continuing going forward, we may not actually see this kind of slippages continuing. Some of the accounts that slipped in the first quarter, quite a lot of them have been pulled back also. But yes, overall, I think the way economy is actually if the larger companies still don't do well, actually, so some impact of that could come. But overall, we don't think that for the year as a whole, we will exceed the slippages that we saw last year.
Okay. And in terms of the trend in sales, you [ don't ] do the 30-day or 31- to 60-day bucket, particularly for SME. Have we seen it rising over the last 1 or 2 quarters given the state of the economy?
They're approximately the same level.
Yes. INR 5 crores and above, which we gave SMA 1 and 2, if you look at the data. So it is steady between March last quarter and this quarter. So the trend should be steady excepting with this like when we do Y-o-Y comparison. This INR 1,200 crore, INR 1,300 crore, whatever dispensation was available from RBI, we've normalized for that, then I think it -- so the way to look at it is that agriculture, SME and our P segment loan, which is what we call the retail, the book is almost now INR 11 lakh crore. And the slippages in this quarter have been unusually high at INR 11,000 crores, out of which INR 3,500 crores, if we are doing Y-o-Y comparison, so that if we set aside, so it is about INR 7,000 crores. And in the first quarter, it is always elevated. So going forward, these slippages, hopefully, will come down as far as the retail book is concerned. Parveen, anything to add?
And secondly, in terms of the overall investment profits, or say, the M-to-M gain on the AFS portfolio, looking at the pool of AFS which we have, plus the modified duration which we are running and the correction in G-sec here, actually, we were anticipating a slightly higher M-to-M gains. So can you just let us know in terms of what's the component, I think, in this quarter, in particular, M-to-M gains have not been that high?
I think so far as the SLR book is concerned, I think we had around INR 1,480 crores for MTM gain. And the corporate bonds anyway, we didn't have provision to be written back. Otherwise, we had about INR 1,200 crores of MTM gain. Anyway, this is an incremental over the [ mass ]. So naturally with the yield comparison, basically, the convexity doesn't remain at the same level. So the impact of the PV01 may not be proportionate to the change in the yield.
But given that post June as well, we have seen the correction in G-sec.
That has been substantial, I think, in terms of what is. The gain has been substantial post [indiscernible].
Post?
Post target, June.
Three questions. One, if I look at the SMA 1 and 2 data for last quarter, we were at about 7,700, but we reported a reasonably large slippage, both in the SME account, as well as to the corporate account. How do we reconcile these 2 numbers? And what was that one-off, that one account, which you said, could you just quantify as to how much was that account and whether it was part of your SMA 1 and 2 in the previous quarter?
Again, there was some technical error. So that account, it was a state government account that has been rectified within July itself. But on 30th June, it was appearing in SMA 1 and 2. And this time, we have split SMA 1 and 2 figure into 2 categories. One is where the banking system exposure is more than INR 2,000 crores. So that data is appearing on the -- our slide on ICA, where we have given NCLT and ICA resolutions and this one is below INR 2,000 crores. The figure, if you exclude that INR 2,014 crores, so more or less, we are at the same level as the fourth quarter. And the ICA, the next slide, if you can go, where NCLT resolution, there, IC is there. Yes. So this INR 19,142 crore, INR 2,600 crore is in SME and rest is standard. But as for RBI designation, they would fall in the category of financial difficulty and distressed assets.
Sorry, I didn't get it. What does the previous slide state? Because it says 7,772 right?
Right. That is accounts, there is a clarification here, just go to the slide. Go back. If you read it, accounts with SBI exposure above INR 5 crores and below INR 2,000 crores from banking system, right?
Okay.
So this is below INR 2,000 crores from the banking system and appearing in SMA 1 and 2. And there are SMA 1 and 2 what, INR 2,600 crores, which are appearing in ICA list because the banking system exposure exceeds INR 2,000 crores. So through that, the treatment is different. When it is INR 2,000 crores and above, you have to decide whether you're going for resolution or you are taking it to NCLT or initiating any other legal action. So in this INR 19,000 crores, INR 14,000 crores comprises of 2 accounts and rest of the 18 accounts, you can see therefore, in 18 accounts are accounting for the rest of the INR 5,000 crores. And out of that INR 5,000 crores, INR 2,600 crores is in SME category, and the NPA list of those 18 accounts, that is separate.
So if I add this one and the earlier...
Add the 8,000 there approximately and 19,000. So this is the total [ lister's ] book of the bank, INR 27,000 crore.
Or INR 5 crores and above.
INR 5 crores and above.
Second, on the Mudra accounts, can you just confirm what is your total outstanding as we speak? And has that been also a cause of problem for the current quarter?
In terms of the overall contribution to bank's NPA, not as much a cause of concern. But in terms of percentage NPA, Mudra is on the higher side. And -- but if total NPA book of the bank, if you look at it, which is INR 1 lakh 68,000 crores, so the contribution of Mudra is around only 2%.
The contribution to?
NPA book.
Is 2%.
Not the book, not the bank's book. The NPA, INR 1 lakh, 68,000 crores, so they would hardly be 2%.
Okay. And what is the outstanding loans in Mudra?
INR 36,000 crores.
Okay. Can you also just reconfirm what will be the outstanding NPA number?
INR 3,500 crores.
INR 3,500 crores. Is this going to be a cause of concern in the next couple of quarters for you?
No. What we are trying to do is that the process of sanction. So we are moving toward what we call [Foreign Language]. We have tied up also with one of the fintechs. So the underwriting model isn't going to change, and it will be an end-to-end digitized process for sanction of Mudra loans. So whatever has happened, we'll continue to follow up and recover. But the bank's effort would be that going forward, the underwriting model has been revamped. And I'm hoping that with the change in the process, the slippages should be much lower.
And you don't have any backstop arrangement with the government of India in terms of...
They have a guarantee, they're part of the, like Mudra loan, but you can make a claim only after -- 3 years? It's a portfolio-level guarantee. It's not individual loan guarantee. But Mudra currently is this. So we will claim from government as and when the -- you can claim as for whatever their scheme is.
Here, sir? Sir, can you give some color, like what sort of interest reversal we had this quarter because of the NPA?
Prashant?
So interest reversal for this quarter is almost INR 2,791 crores as compared to INR 1,243 crores in the quarter 1 of financial year '19.
Okay. And sir, on the equity slippages, was the interest reversal for more than 1 year?
Yes.
It always is for 3 years.
Sorry?
3 years.
And what could be the quantum of that?
That is what mostly INR 2,791 crores is that only. I think actually it's a large constitution of that.
And sir, on the employee cost side, you made some provision towards pension. If you can quantify how much we have made? And until what level of yield we are now protected?
The total provision for pension, actually everything taken was INR 4,000 crores...
Like the provision for pension is INR 1,500 crores, sir, Y-o-Y.
Y-o-Y increase.
Y-o-Y increase is INR 1,500 crores.
So last year, we had INR 2,500 crores provision?
Yes.
And this year is INR 4,000 crores, so additional INR 1,500 crores is only for...
Yes, provision for the employee. So it has gone up by [ INR 1,000 crores ]. But last year, we had INR 900 crores of gratuity provision also. So that continued to December last year, so that will be provisioned because of the drop in the yield. You can say that, of course, mark-to-market gain is post operating profit. But otherwise, it has more or less been neutralized.
Okay. So is it fair to say that, of the INR 4,000 crore, INR 900 crores is towards this provision, and INR 1,500 crores is towards additional pension provision?
As for additional, basically, if you see on the pension side, okay, there is an increase of almost like 4,150 and 3,143 last quarter, Y-o-Y. So you see increase of INR 1,000 crores. So there is an increase of INR 1,500 crores on account of pension, but there is a reduction of INR 500 crores on account of gratuity. Because last time, we were making gratuity provision of INR 900 crores per quarter.
So on a normalized basis, next quarter onwards, what should be the pension provision for us?
Depending on the...
Yes. I think there will not be any major change. And this, if the yields remain where they are, then there will not be a major change. So what the -- like the way it works is that on demand side, you gain on your AFS book. But part of it gets negative by way of the higher provisioning. And the provisioning impacts your pre-provision operating profit and gain in mark-to-market is after that.
So like of the INR 4,000 crores, INR 1,000 crores won't be repeated next quarter, so it will come down to INR 3,000 crores that you think remains.
May not be repeated. This may -- INR 4,000 crores. Depending upon the yield.
Yes. Depending on the yield.
So this is not -- the thing that in June, it has jumped and this thing it comes down. And because the -- every -- the actual yield valuation, which happens in March, the cap is for the whole year. And after that, periodic revision happens every quarter depending upon the yields in that quarter.
So last year, when we had INR 4,000 crores of additional provision because of gratuity. So that will get nullified..
That has been nullified now already.
That will get nullified because of the additional pension provision we have also made this year.
Yes, exactly. That's what we are seeing.
Sir, we had done some coordination with NBFCs. So if you can give us some color, like...
Just a beginning, and only with one company, a very small amount. But that is like from September onwards, we are expecting that there will be a pickup in the activity because a few more NBFCs will come on the platform.
Yes. Sir, in terms of your retail loans, which are 663,000, how much come from the salaried class? And how much from the non-salaried class?
Most of it is from that.
And almost all of them would be State Bank of India accounts?
With State Bank of India?
They are account holders with...?
Yes, yes, most of them. Because all the personal loans, they all are salaried, what we call Xpress Credit, which is a very popular product. Home loan is, I think...
May or may not...
95% -- 90% to 95% will be salaried. So the bank is not very active in non-salaried class. So we are not worried about that INR 6 lakh 60,000 crores portfolio because these are all government employees, whether central government, state government, central PSUs. So the market segment is really different for the State Bank of India. However the issue always remains around agriculture and SME. And of course, corporate book is and has been a source of trouble. But we have good handle on it and we are expecting that this year, there should be some good resolutions. So if that happens, then the P&L number going forward, they will be looking really different than what they are looking in the first quarter. But as a matter of strategy, if you ask, we don't consider any one-time exceptions. So what is the growth in the core operating profit? That is where our entire focus is. And how do you contain your credit costs? So these 2 are, I think, the core elements on which bank's performance internally we are measuring. Some one-off items will always be there, they can be on the positive side, they can be on the negative side.
Sir, right now, the auto industry particularly has been growing because of wholesales being lower, inventory being cleared off. But once the growth begins to happen, the space vacated by many very small NBFCs, what is the specific strategy to get market share there with the right clients?
I think you're talking of -- I don't know how long in the future, actually, when the whole thing becomes normal and the space becomes available. I think, right now, there is a [ stretch ] in the sector. So hopefully, this should get sorted out in the coming months. And the growth has to come back into the sector, actually. But I think right now, the way we are looking at it is, yes, we do have some exposure. We are working with all the auto dealers to see that in August auto sector gets back into shape. Even on the individual accounts again, I mean, you look at our growth rate also it's been quite high, actually. And again, we have been very selective in terms of customers. Going back to your first question, how many of these customers are our customers and how many are having salary accounts with us, on the personal loans, most of them are our customers, okay? And they have salary accounts with us. Only when it comes to home loans, they are generally salaried customers, but may not have a salary account with us, okay? But again, I think we have been expanding it. But again, very cautious approach we have been having in terms of expanding this portfolio.
Besides interest rate cuts, is interest rate cut enough to really revive the whole situation, which is [ down ], right, in your opinion? I mean when you talk to your MSMEs or the larger groups, what impression do you get?
If economies could be revived, then we would not have a negative interest rate and easy [indiscernible], and we still have the same situation. So what I have found when there is a demand, nobody cares what the interest rate is. So even if [indiscernible] has cut by almost 75 basis points, I have brought down my reporting lending rate by 50 basis points. Now we have aligned it to the repo.But working capital utilization, I'm not seeing any pickup. So when people need money, they will borrow. But if they don't need money, they will not borrow, even if you offer them 5% interest rate. So I think it is more to do with the sentiment, more to do with the expected IRR, rather than just one factor. But this is my view, it is a -- it may not be aligned with what the traditional theory says. But I have seen then when the market is hot, people are willing to borrow even at 12%, 11%. And they don't care. And now we have reduced interest rate, but it has not resulted in any increase in the demand for the funds.
Sir, you just mentioned on the monetary transmission. So the respective Governor and the Finance Minister, both have alluded on this point that enough transmission is not happening. I mean our point of view, banker's point of view, is likely that deposit cost linked, we can reduce. So do you think -- and you did mention that part of it is now linked to repo. But do you think that they will push us towards more of our book getting linked to repo and reduction in rates, and in that case, what happens?
So what we have done is that, at least for the State Bank of India, there is not as much an issue around customers. Because we have more spread.
Users.
So now my -- all my working capital, cash carry, forward draft, they all are linked to the repo rate, lending rate. Housing loan, repo-linked lending rate. Most of the short-term loans, they also come linked to most of the times, external benchmark, right? So what is currently not linked is the term loans, where they're still linked to MCLR. And MCLR, of course, it is all formula driven. MCLR, we have always said it is a derived value. And unless the elements of that MCLR, which includes your cost of operations, your cost of deposit, margin and cost of deposits, return on network, et cetera. So that value, we don't have any flexibility. And it is just whatever are the inputs we gave and output is generated by the Excel worksheets are on here. And some analysis we have done over a period of time, whatever has been the change in the repo rate cut, the bank's lending rates have followed that. But there is always a time lag. So the impact, if today, if we have done repo-linked lending rate for working capital loans, its impact will be visible only after maybe 6 months, it will not be immediately visible. But SBI, nobody has complained about transmission.
Okay. Yes. Sir, in this falling interest rate environment, do you think that [ ask ] spreads would come under pressure?
No, we will cut the deposit rate also. The spread, we will maintain, right, it will improve. There's no way it's going to go down. Because I have to cover all my credit costs also.
Okay. Yes. So as you said, that your actual spread will go up. If you look at the customer momentum has been very slow. I think we are the only one who have even linked our savings rate to repo. So that actually, I think once the repo rate is cut, maybe by 50 basis points or so, that we'll see repo -- savings rate cut as well as a lending rate cut. So doesn't that mean that we will actually have more pressure on the spreads, basically, the core spreads, when the repo rate is cut immediately?
So if you look at it, while we have cut our deposit rates, so the fixed deposits also. So we take like a comprehensive view in our ALCO, that how the liabilities and assets are moving. But I don't see a pressure on my margins as of now because as far as the risk premiums are concerned. So there was a time then when bank was giving a lot of concessions on the spreads, but that we have cut down. So it is not only about what is the benchmark rate, but it is about how do you manage your spreads over and above the benchmark rate? And how do you take care of your cost of liabilities. There is a limitation, I know, that savings bank also. We have now reached almost 3% for all the savings bank accounts above 1 lakh. So we can't go on cutting our savings bank [ with interest ]. So all these things, let us see what the policy does on 7th August. And after that, we'll decide what is to be done.
So you can always de-link the savings rate from the repo rate...
We can do anything.
So that you can also do on the lending side?
Yes, yes. On the lending side also.
Okay. That's a relief. So secondly, is about the credit cost. So to this quarter, yes, we have one large account coming in because of the technical reasons as such. But so what is our feeling on the DHFL that even if there is a resolution. Will it come with some haircut? And if yes, then are we building in the kind of credit costs that we'll have to make on this account and there are many other accounts which are in the pipeline?
In June itself, we have built some provisions. And the estimate for the credit cost, which is 1.4, it does take into account [ results ].
For the full year.
So this -- this account and one renewable energy account, I have already built provision of almost INR 1,200 crores plus INR 1,100 crores. INR 2,300 crores. So another -- the almost identical amount, that is what we need to do more. And then we would have covered. So provision coverage ratio for the State Bank, which is now 71% for the corporate book. So that is more than sufficient. And there is no pressure. So whatever credit costs will come, we had estimate for the accounts which were in NPA book as of March, which was INR 11,000 crores.Our Mr. Parveen Gupta, he needs about INR 10,000 crores to INR 12,000 crores. And fresh slippages, another INR 11,000 crores, INR 12,000 crores. So we are very much in that 1.40%. But if something catastrophic happens, something very unusual happens, something which we can't foresee at this step, then it's a different matter.
So this INR 2,300 crores of provisions that we have made, where is it?
It is in standard excess provision.
Okay. So there, we have already made. So any basis of...
The basis is simple. One is bonds, 25% write-down. And on the loan, about 7.5%. In case of the account in power sector, renewable energy, fund is outstanding, entirely provided for. And we know as on date, what is the estimated recovery. So based on that estimate, the gap is now very manageable. And this we will align in September quarter. Because by that time, we will have full visibility where are we moving in terms of resolution.
That's good to hear, sir, that we have made some provision.
No, we are very proactive in provisioning. That's why like, of our net profit number, we are in no hurry in giving a boost. It will automatically go up. So the provision, whatever is required, it will be upfront.
Okay. And sir, do you really remain hopeful that the resolution on DHFL particularly will happen by this month?
The outer date for the resolution is 6th December.
That's too far. I mean before the [indiscernible].
We are aware. All lenders are aware. It is a large account. It's an important account from system perspective also. So the effort is that it should be resolved within the September quarter. But given the number of lenders, different type of creditors, mutual fund is there, pension fund is there, depositors are there, retail bondholders, lenders. So there's a variety. So in such a scenario, if we do it by 6th of September, it is a [ miracle ]. But if you don't do it by 6th of December, in any case, you have no choice but to take it to the court.
But if it doesn't happen by 30th September, chances of it becoming NPA in third quarter, it will go up?
As of now, it is a performing asset. So that may go over the 90, we don't know. Whenever it is overdue for more than 90 days, we classify it as NPA.
Sure. So the last time around, we had actually given a guidance on ROA that we wanted to reach, our aspiration ROA for 1% in FY '20.
It was another world, yes?
Still, after that [ guide also ] where do you think that we will settle around?
So if I go by the current trend, what we were expecting between 70 to 80 basis points, right? I was not taking exceptional items. Or if there are exceptional items in, 1%, which is that INR 16,000 crores, yes. So I'm still very hopeful that at least in this year, I will recover that INR 16,000 crores. Then we have some plan to divest. So net profit also have not changed. So if I go by the current trend, we are looking at around anywhere between 0.5 to 0.6.
On core basis.
On the core basis and on the extra, whatever comes in, that is extra.
So there are some questions on webcast. So I would just like to -- just there for the question and answer. There is one question related to what would be our NIM on the International Banking business? So we are expecting around 1.20 on the International Banking business. There is one question about the guidance for the full year margins. So at present, we have 3.01. And we are expecting something upward of 3.15. There is a question related to a sharp rise in the exposure to the telecom. So it's a large private sector and one public sector.
It's a structured obligation.
And sir, there is one question related to the slippage trend and new stress in the corporate. And whether we would be able to maintain the slippage and the credit cost guidance for the full year. I think that has already been answered by the Chairman.
I have already answered that. But the normal run rate in corporate book is INR 3,000 crores per quarter. So which remains. And plus INR 14,000 crores. And so [ the guide is ] INR 14,000 crores [ it will be around ].
Sir, there is one question related to the IPO of SBI Cards.
We have in mind and most likely, it will come in the last quarter of this financial year.
And sir, the last question is about the guidance for the loan and deposit growth for the current financial year.
That was in the -- that was -- it's maintained? Loan growth.
Loan growth.
And the deposit, it is at about [ will ]. So when I need the money, we will raise the deposit.
[ Could you comment on the INR 3,000 crores ]...?
It is INR 19,000 crores of our [indiscernible].
Yes, but why INR 14,000 crores?
This is inclusive of both advances, loans as well as investment. That is the total.
What she is saying is that INR 14,000 crores is there...
Yes, sir.
So these are 2 accounts, one we have discussed in detail, one more. This INR 14,000 crores, we are hopeful that resolution will happen within the next -- not even 6 months, maybe 5 months -- within the next 5 months. Suppose resolution does not happen. Then there is problem.
Got it. And that INR 14,000 crores is included in the INR 19,000 crores?
That INR 19,000 crores.
The important question, but anyway, since time is there. What are the -- is there any chunky, or is there any non-SLR book, is there any private sector bond or something, which is in the non-SLR book? Because some of the good companies, they have just became junk on their rating.
[indiscernible]
[ There will be odd-thousand ] crores?
No. [indiscernible] banks [indiscernible].
There was a slippage that got [indiscernible].
What is the chance of the slippage in any other non-SLR? Or any signals you've received those -- about those?
I think that has been already discussed.
Slippage is in the INR 19,000 crores.
I meant that is in non-SLR, is this...
Everything is here [indiscernible].
This is a [indiscernible] also whether it is stressed, it is all captured here.
So even the investments? That is what I was saying.
Yes. It's included. For these loans...
Other than that, nothing else or any other signals? No. I thought today only. And sir, yes, you just now commented on rating agencies and ratings. I have heard or I have read somewhere that SBI is saying now that maybe up to a certain amount of INR 50 crores or so, we will go more on our own internal rating, than we've -- than asking for the rating from the external agencies. Is that -- is there some substance in this, or...?
Even when this issue around rating agencies did not arise, we always were relying on our internal rating. External rating, more for the capital purposes because that is what the regulatory dispensation is. But when it came to underwriting, our other lines, it was more on the internal ratings. So there's no change in that approach. Or there is no change in raising or changing the benchmark or the amount above which we insist for external rating, that we will continue to do. And there is a mapping also that our internal team, their PD and what is the external rating and PD of different agencies. All that exercise, bankers have done.
So the INR 10 crores and above remains same to get on the...
Yes.
And sir, some developments on just some of these old accounts, like Jet Airways and IL&FS or something. I mean what is happening there? From the recovery point of view, are you getting some good picture, something positive on those accounts?
This again, we have covered in our presentation where are we. And there are many accounts where like some accounts have moved from whatever classification they had done from amber to green and all that. And the same process is also on for renewable energy projects, the solar projects, road projects. But anything has yet to actually materialize. And about the [ general position ], NCLT, we will see tomorrow what happens. Otherwise, it goes into liquidation.
Tomorrow is the -- so no -- a lot of time, we read about that some discussions are going on with prospective bidders or with some groups are coming and showing interest and all that. Is there any major substance or a positive...?
Now it is being handled by RP. So people are approaching RP. So let us wait until tomorrow, what happens.
So [ accounting ], how much shareholding do we have in SBI in Jet Airways?
Shareholding or shares?
Shares. Shares in...
We don't hold any equity in Jet Airways, whatever the...
Nothing converted of...?
But exposure on Jet Airways is INR 1,600 crores. I have already provided [ INR 800 crores. ]
Nothing was converted?
Nothing was converted. All right. Are we done?
I trust all the questions have been addressed. If we have no more questions, let me end the evening by thanking the Chairman, the top management team, the analysts. Ladies and gentlemen, we hope all your queries have been addressed satisfactorily. To round out this evening, we request you to join us for the [Foreign Language], which are arranged just outside the hall. We wish you a very pleasant weekend. Thank you.